Trump going after pharmacy-benefit managers to cut drug costs

Marty Schladen The Columbus Dispatch @martyschladen

Thursday

May 10, 2018 at 10:15 AM

President Donald Trump will announce sweeping new restrictions Friday on pharmacy-benefit managers — middlemen who negotiate drug prices with manufacturers and reimbursements to pharmacies — as part of a sweeping plan designed to lower Americans' prescription drug costs.

Critics point to three companies they say are using their dominance in the $300 billion marketplace to pad their pockets and drive out competition. The Dispatch has been reporting since March on suspicions that one company, CVS Caremark, has been exploiting a lack of transparency in its Ohio Medicaid contracts to boost profits and break retail competitors.

In addition to working with Medicaid managed-care plans, pharmacy-benefit managers (PBMs) contract with private insurers and Medicare managed-care plans to handle drug benefits.

Seema Verma, the Trump administration official who oversees Medicare and Medicaid, told the American Hospital Association on Monday that "PBMs are serving two customers — being paid both by manufacturers for getting on formularies (lists of insured drugs) and by plans for managing their drug benefit. This makes it unclear who they’re actually aligned with."

She also said, "The higher a manufacturer’s list price, the larger a rebate will be, since rebates are calculated as a percentage of list price. And the higher the rebate, the more money that plans and PBMs get. The bottom line is that all of the incentives are lined up for manufacturers to set higher and higher prices."

Trump has blasted high drug prices since taking office.

"I can tell you that the framework the Secretary (of Health and Human Services, Alex M. Azar II), has developed will dismantle many of the provisions that shield parts of the drug industry from more vigorous competition," said Scott Gottleib, Food and Drug Administration commissioner, during the Food and Drug Law Institute's annual conference last week in Washington.

In February, the White House Council of Economic Advisors issued a report that also was critical of the pharmacy benefit industry, which is dominated by CVS Caremark, Express Scripts and Optum RX.

"Three PBMs account for 85 percent of the market, which allows them to exercise undue market power against manufacturers and against the health plans and beneficiaries they are supposed to be representing, thus generating outsized profits for themselves," it said.

That report resonated in Ohio.

"The issues raised in the new White House Council of Economic Advisers report on drug pricing is a welcome addition to the mounting case for reforming a broken PBM industry that has yielded Americans less choice, decreased access, and higher drug prices," Ernie Boyd, executive director of the Ohio Pharmacists Association, said in a statement. "We will continue to advocate for change so that both providers and patients are better protected."

In Ohio and other states, CVS is accused of charging Medicaid managed-care providers — and ultimately taxpayers who pay for Medicaid — far more than it is reimbursing pharmacies. It also is accused of exploiting low retail reimbursements to put competitors out of business. CVS vehemently denies that it engages in anti-competitive practices.

Ohio lawmakers have filed a number of bills to make the company's pricing practices more transparent. Also, the Department of Medicaid has requested pricing data from CVS and Optum and is conducting an analysis.

The New York Times reported that Trump will criticize makers of brand-name drugs for high prices and prolonged patents, which keep cheaper generic alternatives off the market. In addition, he'll attack PBMs' role in maintaining the status quo by negotiating rebates on brand-name drugs and pocketing most of the savings, the paper reported.

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